Qihoo 360 Delisting Could Spark Many More Chinese Companies To Go Private

Chinese Internet-security company Qihoo 360 is finalizing a go-private deal for $9.3 billion in cash, the biggest privatization of a Chinese company listed in the U.S. in an ongoing trend of recent delistings following a burst of IPOs of China tech companies in the U.S. just five years ago.

The Qihoo news comes six months after its chairman first proposed a deal and represents a lower valuation than hoped for, though the completion of the deal itself is no small feat. The final buyout​ offer is from a consortium led by Chief Executive Zhou Hongyi, and includes ​entities such as Sequoia Capital China, Ping An Insurance​, Citic Guoan and ​New China Capital. ​Qihoo plans to finalize the details in the first half of 2016.

​Beijing-based ​Qihoo, known for its desktop and mobile antivirus and malware products, has been raising the billions necessary within a volatility-filled market in China during the second half of 2015​, as Chinese stock markets have tumbled. Since mid-year, Shanghai’s benchmark index has fallen 30 percent, and regulators have only recently loosened a ban on new listings on China’s stock market. In the midst of these circumstances, many of Qihoo’s original buyers withdrew or revised their bid​s. However, the strong reputation of the company, recognized as one of the most influential within China, helped it to pull through.

As of November, more than 20 Chinese mainland companies were planning to queue up to go private and delist from the U.S., in deals collectively worth $40 billion, with the expectation of listing in Shanghai or Shenzhen at higher valuations.

Among the more prominent privatizations are online game developers and operators Shanda Games and Perfect World in addition to R&D services provider Wuxi Pharmatech and medical device manufacturer Mindray Medical International.